Pound Sterling slips day after MPs clear Brexit bill for Theresa May to trigger Article 50

The pound slipped against the euro and the dollar on Tuesday, a day after MPs and Lords passed a bill paving the way for Theresa May to kick off the Brexit process by triggering Article 50.

In early trading in London the pound was hovering around $1.214 against the dollar.

On Monday, it had jumped after Scotland‘s First Minister Nicola Sturgeon demanded another independence referendum, to be held in late 2018 or early 2019.

Strategists said that the volatile nature of the currency in recent days likely provides a taste of things to come.

Dean Turner, an economist at UBS Wealth Management, said that if approval for a second independence referendum becomes increasingly likely, that would create an overall increase in uncertainty and that he would therefore “expect volatility in sterling to rise”.

Michael Stanes, an investment director at Heartwood Investment Management, said that he was limiting his exposure to any UK assets at the moment, including equities, many bonds and the pound.

“Until we get more clarity on the political and economic outlook, we are not yet ready to repatriate assets back into the UK,” he said.

Going forward, forecasts for where the pound is heading are mixed.

FXTM’s chief market strategist Hussein Sayed said that Brexit now seems wholly priced in to where the pound is trading, but that it’s too early to say that the currency has “found a floor”.

“The beginning of the formal negotiations might indicate that there’s still room for [a] further drop, especially if the EU [takes] a hard stance,” he said.

The currency is down about 18 per cent against the dollar since the EU referendum in June and while there seems to be a broad consensus in markets that the prospect of a hard Brexit is already being reflected in where the currency is trading, many believe that it could still trend lower over the medium term.

Deutsche Bank economists in early March predicted sterling would plunge to $1.14 by the end of June, which would be a new 31-year low for the currency, even including the flash crash that sent the pound plunging more than 6 per cent on 7 October.

Analysts at Danske Bank earlier this month said that they expect the pound to fall to $1.19 by the end of March.

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